Real estate market sees flood-insurance relief

It could take federal officials months to fully implement a relief bill that eases some devastating changes to the National Flood Insurance Program, but help has already arrived for many potential homebuyers looking to score a seaside home in time for summer.

It could take federal officials months to fully implement a relief bill that eases some devastating changes to the National Flood Insurance Program, but help has already arrived for many potential homebuyers looking to score a seaside home in time for summer.

President Barack Obama on March 21 signed into law the Homeowner Flood Insurance Affordability Act, which aims to lessen the worst effects of the Biggert-Waters Flood Insurance Reform Act of 2012.

Biggert-Waters eliminated flood insurance subsidies for homes that were originally built to code, but were subsequently remapped at a greater flood risk, causing premiums to soar.

The financial impact would intensify with the Federal Emergency Management’s release of new flood maps that expand flood plains and raise predicted water elevations. FEMA has delayed Plymouth County’s maps for at least a year while it answers appeals from Marshfield and Scituate, but Quincy’s maps go live June 9.

Those who were looking to buy or sell real estate after Biggert-Waters was passed in July of 2012 felt the most substantial and immediate impact. While the law phased out grandfathering for existing policies, it included a sales provision that triggered accuracy rates as soon as a property changed ownership.

In some extreme cases, interested buyers in coastal towns like Scituate and Marshfield received quotes for mandatory flood insurance upward of $50,000, causing them to back out of the transaction.

“Since Oct. 1, we did see sales fall apart in Scituate, Wareham and places where people were getting an estimate for insurance and walking away from the purchase,” said Chris Haraden, director of agent services for Jack Conway & Co.

Peter Ruffini, president of the Massachusetts Association of Realtors and regional vice president at Jack Conway & Co. in Norwell, said the insurance sticker shock felt by buyers forced sellers to pull their homes off the market.

“At a certain cost insurance-wise, it simply doesn’t make sense,” Ruffini said. “Would you buy a home with a premium of $50,000 a year? … The homes had no market value because who is going to buy into that?”

But the president’s signing of the affordability act immediately reversed the sales trigger, restoring the ability for sellers to pass their policies and below-market insurance rates on to buyers.

Ruffini said this flood insurance relief will encourage sellers to re-list their homes, helping the real estate market bounce back in time for the spring and summer.

“We saw a slower-than-normal start, mostly because of the never-ending winter and a drop in inventory, but we’re confident we’ll see that turn around,” he said. “Now people can put their homes on the market and sell them, and I don’t think you’ll see any more devaluation.”

Page 2 of 2 - Haraden hasn’t seen any real estate deals fall apart because of flood insurance in the past few weeks, but he said buyers are definitely more keen on the issue than ever before.

“Flood insurance rates and the mitigation done to a home already has become almost an amenity for people, and they’re much, much more aware of the potential costs and what they can do now to lower them,” he said.

Joe Rossi, chairman of Marshfield Citizens Coastal Coalition, is encouraging homeowners who may not be required to have flood insurance now but are near a flood zone to consider purchasing a low-cost policy so selling will be easier down the road.